According to the Israeli newspaper Yedioth Ahronoth, the hostages, who were taken from Khan Younis in southern Gaza, appear to have died of suffocation in the tunnel where they were being held.
The newspaper claimed that the incident occurred about six months ago during an Israeli military attack in Khan Younis by the 98th Division.
The report claimed that the army did not target the tunnel directly where the hostages were held but rather hit a Hamas target nearby, resulting in a fire and the subsequent release of lethal carbon dioxide gas inside the tunnel.
Several Hamas fighters were found dead alongside the Israeli hostages, armed with Kalashnikov rifles and showing no signs of injury, it said.
I’m surprised that Hamas apparently did not retrieve the corpses (which are still valuable to them) for six months. My understanding is that information about where hostages are kept is deliberately decentralized to prevent any single leak from letting Israel know all their locations. Did everyone who knew that these hostages were there die? Or maybe the tunnel ventilation system was either insufficient or damaged and the air in that tunnel was unbreathable this whole time?
Edit: Also I’m not seeing this information on www.ynetnews.com which is the Israeli newspaper that OP’s article claims as its source.